By Nick Black
A common concern for retirees is whether their income affects their eligibility for Medicare or increases their costs. The good news is that Medicare is available to all Americans aged 65 and older, regardless of income. However, if you have a higher income, you may pay more for Medicare Part B and Part D premiums due to the Income-Related Monthly Adjustment Amount (IRMAA). This article explains how IRMAA works and how Medicare premiums are calculated based on your income.
Understanding Medicare and IRMAA
Medicare is a federal health insurance program primarily for people 65 and older. It includes:
- Part A: Hospital insurance (usually premium-free if you or your spouse paid Medicare taxes for 10+ years).
- Part B: Medical insurance (covers doctor visits, outpatient care, etc.).
- Part D: Prescription drug coverage.
While Part A is typically free, Parts B and D have monthly premiums. If your income exceeds certain thresholds, IRMAA adds an extra amount to these premiums. IRMAA doesn’t disqualify you from Medicare; it simply increases your costs based on your income.
How IRMAA is Calculated
IRMAA is determined using your Modified Adjusted Gross Income (MAGI) from two years prior (e.g., 2023 income for 2025 premiums). MAGI is calculated as:
- Adjusted Gross Income (AGI) from your tax return (line 11 on Form 1040).
- Plus any tax-exempt interest (e.g., municipal bond interest).
The Social Security Administration (SSA) uses your MAGI to place you in an income tier, which determines your IRMAA surcharge for Parts B and D. The standard 2025 Part B premium is approximately $185.00 per month (subject to annual updates), and Part D premiums vary by plan but average around $40–$60 per month. IRMAA adds to these base amounts.
2025 IRMAA Tiers for Part B and Part D
Below are the 2025 IRMAA tiers for individuals and married couples filing jointly, based on 2023 MAGI:
| MAGI (Individual) | MAGI (Married, Filing Jointly) | Part B Monthly Premium (2025) | Part D Monthly Surcharge (2025) |
| ≤ $103,000 | ≤ $206,000 | $185.00 (standard) | $0 (standard plan premium) |
| $103,001–$129,000 | $206,001–$258,000 | $259.00 | $13.30 |
| $129,001–$161,000 | $258,001–$322,000 | $369.70 | $34.30 |
| $161,001–$193,000 | $322,001–$386,000 | $480.40 | $55.40 |
| $193,001–$500,000 | $386,001–$750,000 | $591.10 | $76.50 |
| > $500,000 | > $750,000 | $628.50 | $83.40 |
Note: For married individuals filing separately, IRMAA thresholds are lower, starting at $103,001, with higher tiers aligning with the individual thresholds above.
Example
- Scenario: You’re single, and your 2023 MAGI was $150,000.
- Part B Premium: You fall into the $129,001–$161,000 tier, so your Part B premium is $369.70/month ($185.00 standard + $184.70 IRMAA).
- Part D Surcharge: You pay an additional $34.30/month on top of your chosen Part D plan’s premium (e.g., $50 plan premium + $34.30 = $84.30/month).
- Total: Approximately $454/month for Parts B and D, compared to $225–$245 for someone with MAGI ≤ $103,000.
How Income is Reported
- The IRS provides your MAGI to the SSA based on your tax return from two years prior.
- If your income has significantly decreased since then (e.g., due to retirement, job loss, or divorce), you can request an IRMAA reconsideration by filing Form SSA-44 with the SSA. Qualifying “life-changing events” include retirement, marriage, divorce, or death of a spouse.
Key Considerations
- No Income Cap for Medicare Eligibility: High income doesn’t prevent you from enrolling in Medicare. It only increases Part B and Part D premiums via IRMAA.
- Tax Planning: Reducing MAGI (e.g., through Roth IRA conversions or timing capital gains) before Medicare enrollment can lower IRMAA surcharges.
- Budget Impact: For high earners, IRMAA can significantly increase costs. For example, a couple with MAGI > $750,000 pays $628.50/month per person for Part B alone, plus Part D surcharges, totaling over $1,400/month for both spouses.
- Check Your Notice: The SSA sends an IRMAA determination letter annually. Review it to ensure accuracy and appeal if your income has changed.
Steps to Assess Your Situation
- Review Your MAGI: Check your 2023 tax return (or 2024 for 2026 premiums) to estimate your MAGI.
- Compare to IRMAA Tiers: Use the table above to see if you’ll owe IRMAA surcharges.
- Estimate Total Costs: Add the standard Part B premium, IRMAA surcharge, and your Part D plan’s premium plus surcharge.
- Plan Ahead: Consult a financial advisor to manage income (e.g., withdrawals from retirement accounts) to minimize IRMAA.
- Appeal if Necessary: If your income dropped due to a qualifying event, file Form SSA-44 to request a lower IRMAA.
Bottom Line
You can never “make too much” for Medicare, but higher income means higher Part B and Part D premiums due to IRMAA. By understanding your MAGI and the IRMAA tiers, you can estimate your costs and plan strategically to reduce surcharges. Use SSA tools or consult a financial advisor to ensure your retirement budget accounts for these expenses.
*Not associated with or endorsed by the Social Security Administration, Medicare or any other government agency.
